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TMI Blog2016 (1) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... e employer Zadona Electronics Ltd. (in liquidation) respectively under Sections 14B and 7Q of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("PF Act") on delayed payments of PF dues. ( 2. ) Zadona Electronics Ltd. (in Liqn.) ("Company") was wound up by an order passed by this Court on 20 June 2007. The Applicant lodged a claim before the Liquidator of the Company for payment of PF dues of employees of the Company in the aggregate sum of Rs. 22,35,38,083/-. These dues included employer's contribution (12% of wages), employees' contribution (12%), administrative charges and insurance charges as well as damages and interest towards delay in payment of PF dues. By his order dated 6 August 2013, the Official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , provident fund dues have priority over all other dues including the dues of secured creditors. So also, it is not in dispute that such priority needs to be accorded not only to provident fund dues computed under Section 7C, but also, to interest due under Section 7Q and damages adjudicated under Section 14B. (See Maharashtra State Co-operative Bank Ltd. Vs. Asst. P.F. Commissioner, Supreme Court judgment in Civil Appeal No.6893 of 2009 dt.8.10.2009 .) The question is whether any of these other amounts claimed are actually due as of the date of the winding up order or at the time of payment of the PF dues. ( 5. ) Since the salaries payable to the employees for the relevant period have been paid in full, i.e. without deducting any employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985, (1 of 1986) subject to such terms and condition as may be specified in the Scheme. ( 8. ) The section provides for an adjudication of damages after hearing the employer in the matter. The order passed under Section 14B is subject to an appeal to the Employees' Provident Funds Appellate Tribunal. The Tribunal has the power to pass any order confirming, modifying or annulling the order appealed against or referring the matter back to the authority for a fresh adjudication. It is only after the order of adjudication of damages becomes final that the question of recovery arises. In the present case, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in payment of its contributions, there is no debt until the liability on account of such breach is adjudicated and damages are assessed by the adjudicating authority. There is no question of the Official Liquidator himself adjudicating these damages. That jurisdiction rests exclusively with the authorities under the PF Act. Till such adjudication is made, there is no debt provable before the Official Liquidator. The following observations of the Supreme Court in relation to the nature of a claim for unliquidated damages for breach of contract, in the case of Union of India Vs. Raman Iron Foundry, 1974 AIR(SC) 1265 are instructive in this behalf : " Now the law is well settled that a claim for unliquidated damages does not give rise to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by different High Courts in India. We may mention only a few of the decisions, namely, Jabed Sheikh V. Taher Mallik, 1941 AIR(Cal) 639: S. Milkha Singh V. M/s. N.K. Gopala Krishna Mudaliar, 1956 AIR(P&H) 174 and Iron and Hardware (India) Co. v. Firm Shamlal and Eros, 1954 AIR(Bom) 423, Chagla, C.J., in the last mentioned case, stated the law in these terms: "In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party. As already stated, the only right which he has is the right to go to a Court of law and recover damages. Now, damages a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so due till the date of its actual payment. Provided that higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank." There is no difficulty about payability of such interest under Section 7Q; the question is whether such interest is provable in winding up of an insolvent company. Rule 179 of the Companies (Court) Rules contains the only provision for payment of interest after the date of the winding up order. In the first place, such interest is paid only in the event of there being a surplus after payment in full of all claims admitted to proof and secondly, it cannot exceed 4 per cent per annum on the admitted amount of the claim. As held by our Court in IDBI Ltd. Vs. Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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